Local schools dip into reserves to cope with state budget cuts

With millions of dollars in reserves, York County's four school districts stand to weather a recent barrage of state budget cuts, but some warn that an overreliance on savings could lead to trouble.

The latest cut in state money -- 7 percent across the board, announced Thursday -- trails an earlier 3.6 percent cut. Without reserves, school officials said, they likely would have to lay off or furlough workers.

"We all are blessed in that regard," said Clover schools finance director Ken Love.

Since August, South Carolina has carved a $1 billion hole in a spending plan that in July, was more than $7 billion. Including previous losses, Thursday's cut means public schools must eliminate roughly $364 million from their budgets, state officials said.

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None of the York County districts has said exactly how it plans to absorb the latest loss. They're waiting for specific figures from the S.C. Department of Education.

But most have dealt with the previous shortfall by trimming travel expenses and leaving positions unfilled.

The Fort Mill district has frozen hiring and stopped spending on supplies.

The York school district has ordered each school and department to cut 10 percent of spending.

"We honestly don't know what the impact of this latest cut is going to be," said York schools finance director Amy Hagner.

School district reserves are called fund balances, meaning what's left over after expenses are paid. Districts bank annual overages, which help when unexpected expenses or shortages crop up.

The funds also help boost districts' credit scores. Credit rating agencies consider the size of reserves when they rate school districts. A large, consistent cushion tends to garner a higher rating. That gets districts better interest rates when they sell construction bonds.

Balancing act

Keeping too much tax money on hand can get tricky.

"You walk a thin line between having too little and too much," said Rock Hill schools associate superintendent for administrative services Bill Mabry.

Districts don't want too much in savings, he said, because they worry taxpayers might perceive that as hoarding money and demand some be returned.

All four York County districts have what some called "healthy" fund balances:

&#8226; Rock Hill schools: $23 million;

&#8226; Fort Mill schools: $13.7 million;

&#8226; York schools: $9.25 million;

&#8226; Clover schools: $13.3 million.

District officials said they will likely dip into reserves for expenses state money would have covered, such as employee salaries.

But they see it as only a temporary fix.

"I don't intend to keep recommending to the board to keep going to the fund balance," said Fort Mill schools superintendent Keith Callicutt. "It's not good business. It makes no sense to use non-recurring revenues for recurring expenses."

Aside from depleting the fund, one potential drawback of relying on reserves for monthly expenses can be a weakened credit rating, said Brock Heron, president of the S.C. Association of School Business Officials. That, in turn, would mean higher interest rates when borrowing money, he said.